Walmart turns the comps corner as holidays arrive
BENTONVILLE, Ark. — Walmart delivered a long-awaited same-store sales increase of 1.3% at its U.S. stores division in the third quarter and pointed to ongoing momentum for the holidays with comps guidance ranging from flat to up 2%.
The improved sales performance and favorable guidance offered some vindication for a company that had posted negative quarterly results for more than two years. Walmart spent much of this year repositioning its domestic business and was intent on demonstrating the return to its core strategy of offering everyday low prices on a broad assortment of merchandise would resonate with shoppers and produce sales growth even in a challenging economy.
The 1.3% comps increase exceeded the upper end of the company’s guidance range that called for a 1% increase and contributed to third-quarter earnings per share of 97 cents, which was two cents better than the prior year when earnings of 95 cents per share were inflated by a tax benefit of five cents per share. Despite the improvement, the figure was a penny shy of analysts’ consensus estimate of 98 cents, but squarely within the company’s guidance range that called for EPS of 95 cents to $1.
Wal-Mart Stores president and CEO Mike Duke characterized the earnings growth as solid and said each of the company’s business segments — U.S. stores, international, Sam’s Club — is stronger today than it was a year ago.
“Both Walmart U.S. and Sam’s Club exceeded comp-sales guidance, and I’m pleased that the sales momentum positions us exceedingly well for the holidays,” Duke said. “We also are pleased with the growth in both sales and operating income for Walmart International.”
Looking ahead, Walmart said it expects fourth-quarter earnings in a range of $1.42 to $1.48, which encompasses analysts’ consensus estimate of $1.45 per share. The third-quarter earnings miss and fourth-quarter guidance that bracketed analysts’ estimate underwhelmed the market and in early trading shares of Walmart, which had touched a new 52-week high of $59.40 the prior week, were down more than $1 from Monday’s closing price of $58.89.
Expectations have become elevated for Walmart in recent months as the company openly discussed improving momentum at various segments of its U.S. business, thanks to strategies put in place beginning in mid-2010 that were gaining traction.
“Three key elements drove the comp improvement in the third quarter,” said Bill Simon, Walmart U.S. president and CEO. “Our focus on expanded assortment, product innovation and local relevance improved merchandise offerings throughout the store and customers responded. Productivity initiatives improved in-stock levels, and we continue to drive price leadership in all our stores.”
While comps were up in the third quarter, the increase was driven by an increase in average transaction size as overall customer traffic was lower than the prior year. However, in a nod to the momentum the company said is building, it was noted that third-quarter customer traffic had improved when compared to the second quarter. Total sales at U.S. stores increased 2.7% to $63.8 billion.
One of the biggest bright spots for Walmart continues to be the Sam’s Club division where same store sales advanced 5.7% without the benefit of higher fuel prices. Sam’s Club sales increased 6.2% to $11.8 billion, excluding fuel.
“This is our seventh quarter of sequentially increasing comps, and we expect that sales momentum to remain strong,” Sam’s Club president and CEO Brian Cornell said.
The warehouse club division expects fourth-quarter comps, excluding fuel, to increase between 4% and 6%.
Family Dollar arrives in California
MATTHEWS, N.C. — Family Dollar is expanding into California for the first time with the opening of four new stores in Ontario, Rialto, Riverside and Fontana. The company’s aggressive growth plans also include 450 to 500 new stores to be opened in fiscal 2012.
“We’re proud and excited to bring our value and convenience to more customers with our newest stores in California,” Family Dollar chairman and CEO Howard Levine said. “These stores offer an opportunity to introduce our new neighbors to a more compelling place to shop for everything they need for their families.”
Family Dollar is celebrating its California store openings with weekend-long events beginning Thursday, Nov. 17.
Retail sales see small increase for October
WASHINGTON — Retail sales edged up slightly during the month of October, the U.S. Census Bureau announced Tuesday.
Adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, sales totaled $397.7 billion. Retail trade sales rose 0.6% above September and 7.3% above the year-ago period.
Adjusted grocery store sales increased to $46.8 million from $46.3 million in September, while health and personal care stores saw adjusted sales of $23.3 million from $23.1 million last month.
Although advanced estimates for pharmacies and drug stores are not included in the report, the Census Bureau disclosed that adjusted sales slightly decreased from August to September.
Commenting on the results, the National Retail Federation said that it not only marks the 16th straight month retail sales rose, but it also indicates that consumers are prepared to spend this holiday season.
“Retailers’ early holiday promotions seemed to strike the right chord with shoppers last month,” NRF president and CEO Matthew Shay said. “Knowing the economy is still a big factor in customers’ shopping decisions, retailers will continue to offer great deals and exceptional value throughout the holiday season.”